Tribunal grants waiver for Cenvat credit demand, interest, and penalty

The Tribunal granted the appellant's application for waiver from pre-deposit of Cenvat credit demand, interest, and penalty. The appellant, engaged in manufacturing motorcycles and parts, availed construction services for factory buildings, resulting in a Cenvat credit demand. The Department argued the credit was inadmissible as the outcome was immovable property, not goods or services. However, the Tribunal held that the construction services fell within the definition of 'input service' and that denying credit based on the immovable property outcome would contradict the definition. The Tribunal waived the pre-deposit requirement and stayed recovery until appeal disposal, ruling in favor of the appellant.

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Issues:
Application for waiver from pre-deposit of Cenvat credit demand, interest, and penalty under Rule 15 of Cenvat Credit Rules, 2004 read with Section 11AC of Central Excise Act, 1944. Stay on recovery till appeal disposal.

Analysis:
The appellant, engaged in manufacturing motorcycles and parts, availed construction services for factory buildings, leading to a Cenvat credit demand of Rs.1,15,81,957. The department contended that since the outcome was immovable property, not goods or services, the credit was inadmissible. A show-cause notice was issued, confirmed by the Commissioner, resulting in the present appeal and stay application.

The appellant's counsel argued that the credit was valid under Rule 6(5) of Cenvat Credit Rules, 2004, as the finished products were dutiable. The Departmental Representative opposed, citing Board Circular No. 98/1/08, stating immovable property does not attract excise duty or service tax, hence no credit. The appellant sought waiver based on a strong prima facie case.

The Tribunal analyzed the definition of 'input service' and Rule 6(5), finding the construction services for factory buildings fell within the definition. It noted that since dutiable goods were manufactured, the bar under Rule 6(5) did not apply. Disagreeing with the Department's objection, the Tribunal held that denying credit based on the immovable property outcome would render various services in Rule 6(5) inadmissible, contrary to the definition of 'input service'.

Considering the arguments and precedents, the Tribunal found merit in the appellant's case, waiving the pre-deposit requirement and staying recovery of Cenvat credit demand, interest, and penalty until appeal disposal. The decision was pronounced on 25.2.2011 by the Tribunal.

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